Space is the New Paris – If You Have Enough Money

In 2001, American businessman Dennis Tito paid $20 million to become the first ever space tourist. He was sent to the International Space Station (ISS) by the Russian Federal Space Agency. However, when Tito first arrived at the Johnson Space Center for training on the American portion of the ISS, he was sent away by NASA manager Robert D. Cabana. The reason? “We [NASA] are not willing to train with Dennis Tito.”

In late February 2018, SpaceX announced their decision to launch at least two tourists into space by the end of the year. In response, NASA said that it “commends its industry partners for reaching higher.”

Destination Mir

A 1997 NASA report claimed that the commercial space tourism market could be worth billions. This optimism lead to both individual attempts at space flights such as Dennis Tito’s, and commercial ventures such as the NBC reality show Destination Mir. The programme planned to eliminate guests on a weekly basis, and the winner was to be sent to Russian space station Mir. However, the idea was scrapped when Mir was brought down by Russian authorities in 2001.

In the midst of all this optimism stood an unlikely pessimist. The NASA administrator Daniel Goldin derided Dennis Tito’s spaceflight as akin to someone paying to visit an unfinished hotel. In essence, he didn’t believe space infrastructure was ready for tourism. Additionally, Tito’s $20 million fee was seen as ridiculously low considering the ISS alone cost $24-$25 billion a year in maintenance.

However, since then, NASA’s stance has changed dramatically. In addition to statements like the above supporting private space tourism endeavours, the American space organisation has also promoted the idea of interplanetary tourism. For example, in 2016, they released a series of fantastical posters to stoke interest in the market.

The Birth of the Private Space Industry

Ironically, ever since Tito and his successors proved that there was a viable market for commercial space travel (CST), NASA’s ability to send astronauts out has been limited. A combination of limited space aboard the ISS and the end of the US Space Shuttle Program in 2011 has forced private American entrepreneurs to fill the transportation gap.

Ever since NASA issued its first CST license to a company called Scaled Composites, over a dozen competitors have emerged. This includes the usual suspects such as SpaceX and Blue Origin. According to a March 2018 report in New Space, Virgin Galactic has signed up over 700 participants from 50 countries totalling over $80 million in deposits already for their spaceflight program.

Clearly, there is a thriving market.

However, these numbers are significantly lower than what was expected after Tito’s flight. A 2002 Space Tourism Market Study by Futron estimated 4,000 suborbital passengers by 2015, and $700 million revenue from just CST by 2021. Neither of those numbers is remotely close to the reality. Even revised estimates from 2006 have not been met.

What Counts as Space Tourism?

Strangely enough, there is no strict definition for CST. It covers everything from balloons that travel at suborbital levels – around 100,000 feet above sea level – to shuttles that promise several moments of zero-gravity sensation. Furthermore, SpaceX’s aforementioned trip in 2018 plans to go as far as the moon.

Virgin Galactic have been pricing their seats at $250,000 each, and offer a two and a half hour flight with several minutes of zero gravity. And, of course, a complimentary bottle of champagne once you land.

SpaceX, on the other hand, have declined to reveal how much their two passengers paid for the 300,000-400,000 mile return trip to the moon. NASA have estimated that a round trip to the ISS on a SpaceX shuttle – which is 220 miles from Earth’s surface – would cost around $58 million. An estimate by The Verge puts the moon trip at around $175 million per seat.

Considering the immense costs involved, suborbital transport has much higher barriers to entry. Not only do the companies have to pay for obvious costs such as rocket development, maintenance and fuel, but also for hidden costs such as docking services, launch services, medical services, training services, supplies, and a lot more.

Unsurprisingly, only a handful of private companies can afford to work in the space. In addition to this, there are a few organisations that schedule similar trips through national agencies. Space Adventures, who planned Tito’s trip with the Russians, are the only company to have successfully launched a space tourist so far.

The Space Oligarchy

According to the New Space report, the only companies the can succesfully fund human spaceflight trips are Blue Origin, Virgin Galactic and XCor. The report was published two days after SpaceX’s announcement and thus could not adequately analyse the company’s prospects.

To explain the small number of competitors and the impact they have on the market, the report analyses the industry using Michael Porter’s five factors – (i) the barriers to entry, (ii) the bargaining power of buyers, (iii) the bargaining power of suppliers, (iv) the number of substitutes, and (v) the degree of rivalry within the industry.

As mentioned above, there are high costs to founding a private CST company. According to USA’s Federal Aviation Administration, manufacturing and launching a single rocket costs more than $260 million. Moreover, design costs are much higher – Virgin Galactic has spent over $600 million on the development of their rocket alone.

As can be seen by the arbitrary prices quoted – from XCor’s $100,000 a seat to SpaceX’s multi-million dollar rides – and the soaring demand for an unfinished product, it is clear that buyers don’t have power in the market. This is exacerbated by a lack of substitute services. After all, if you had the money, would you be willing to take a balloon ride over an actual spaceflight?

Considering that these companies need highly specialised, high quality materials for their rockets, you would assume that suppliers would be able to dictate their own prices. However, because of a lack of quality suppliers, companies have started to manufacture their own products. In fact, SpaceX has managed to become increasingly competitive just by producing 70% of their own parts.

In conclusion, since there is next to no real economic pressure on the four private human spaceflight companies, there is no real rivalry. The only differentiation point at the moment is who can do it first. With no rivalry and a small number of companies, the CST industry has all the makings of an oligopoly – i.e. a market that has no economic incentive to ever become cheaper.

Space Travel to Save the Species

During the height of the USA-North Korea nuclear brinkmanship last month, SpaceX founder Elon Musk stated that, “if there’s a third world war we want to make sure there’s enough of a seed of human civilisation somewhere else to bring it back and shorten the length of the dark ages.”

And how does he propose to preserve humanity? “It’s important to get a self-sustaining base on Mars because it’s far enough away from earth that [in case of global conflict] it’s more likely to survive than a moon base,” Musk said.

Considering the prices being quoted for a fly-by of the moon, how many people would realistically be able to afford the trip to Mars. According to Business Insider, there are 36 million millionaires – or about 0.47% of the world’s population depending on the statistics used. Hopefully, being a millionaire should be enough to get you to Mars.

However, more importantly, what is the demographic breakdown of this 0.47%? America has the most millionaires, with around 76% of them of Caucasian descent. But surely governments and companies realise that certain academics will be needed to colonise a new planet? Considering all four companies are American, they will probably recruit from their own country first. Again, though, The Guardian reports that 75% of American scientists and engineers are of Caucasian descent. It doesn’t sound like Mars is going to be famous for its cultural diversity.

For the rest of us non-millionaires and non-scientific geniuses, NASA’s posters may be the closest we ever get to space tourism or travel. At least they’re pretty.

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